How much life insurance might I need?
That was the question posed by a reader to Jeffrey Levine, director of advanced planning at Buckingham Wealth Partners, in this episode of Ask the Hammer.
Well, the answer depends.
1) What is the pressing need that has just occurred in your life? A wedding, a mortgage, a child? "So every time you have one of those major events where future income becomes more necessary, or you increase the amount of debt you have, for instance, it logically makes sense to reevaluate that life insurance need," said Levine.
2) Do you need to purchase life insurance now, when you're younger, even before needs arise so have guaranteed insurability? When your health and young is the most affordable time to buy life insurance, said Levine. "Oftentimes we wait because we don't need it," he said. "But that could mean if all of a sudden you discover you have some sort of medical condition that could increase the cost or potentially prevent you from getting it all together at a later point when you would otherwise need it."
Levine also cautioned against using the rule of thumb that would have you purchase seven times your salary. "I'm not a big fan of rules of thumb," he said.
Instead, he favors using a needs analysis.
Levine also said the answer to the question - what's best, cash value or term life insurance? - depends on what you are trying to accomplish.
"I'm generally a big fan of term insurance because you can afford so much more of it for so much less," he said. "But there's certainly a place for permanent life insurance, such as whole life."
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